

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













installments
within 
after 




 

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



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

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







 
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



discounted note 

1. The creditor (lender) requires an interest rate, called the discount rate.
2. Interest, called the discount, is computed on the face amount of the note.
3. The debtor (borrower) receives the face amount of the note less the discount, called the
proceeds.




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
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


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
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



 Ethiopian Payroll System



 





 
 

 

 


 

 
 



 

 




 

 
 
 

 
 

 


 


 

 

 






 

 

 
 





 

 


 
 
 
 
 
 
 
 








 

 
  
  
  
  
  
  
  


 
 


 


 

 
 
 


 
 

 

 
 
 






 

























Serial No. Name of Basic Transp. Overtime Duration of OT
Employee Salary Allowance  worked(hr) Work
 Zinash Bekele   8 6:00-10:00 P.M
 Alemu Zewde    12 Sunday (8:30-5:30)
 Demeke Shanko    
 Kiya Andualem   9
Public Holiday
 Kibru Jamo    
Additional Information
- The management of the agency usually expects a worker to work 40 hours in a week and
during Yekatit there are four weeks.
- There were no absentees during the month
- Alemu agreed to contribute monthly Br. 1200 from his salary as a monthly saving in the
credit association of the agency.
Required

1. Prepare a payroll register (sheet) for the agency for the month of Yekatit, 2011.
2. Record the payment of salary as of yekatit 30, 2011 using check stub No. 0123.
3. Record the payment of the claim of the credit Association of their agency on Megabit 1,
2011 use check stub No. 0124.
4. Record the payment of the withholding taxes and pension contribution to the concerned
government body on Megabit 7, 2011.
5. Compute and recognize the total payroll tax expense for the month of Yekatit, 2011.
Computation of Earnings, Deductions and Net Pay
Gross Earnings = Basic salary + Allowance + Overtime Earning

Overtime Earning
Overtime earning = OT hrs worked X (ordinary hourly rate X relevant OT rate)

1. Zinash:

= ℎ × ×

= ℎ × ℎ ×

. 11200
=8ℎ × × 1.25 = . 700
160
NB Every employee is expected to work 160 hours per month (i.e. 40 hours x 4 weeks)

 You should compute the regular hourly rate first:



( ) .
Regular Hourly Rate = = = . 70

Therefore, the regular Hourly payment = br. 70

The regular hourly payment must be multiplied by the appropriate OT rate as follows:
br. (70 x 1.25) x 8 hours = br. 700
2. Alemu
.
 = 12 ℎ × ×2= . 1215
3.Kibru
.
 =9ℎ × × 2.5 = . 639.84
GROSS EARNINGS
Gross Earnings = Basic salary + Allowance + OT Earnings
1. Zinash
 Gross Earnings = br. 11200 + br. 900 + br. 700 = br. 12,800
 Remember taxable income in this case is br. 11,900 because the transportation
allowance of br. 900 is not subject to taxation.
2. Alemu
 Gross Earning = br. 8100 + br. 1215 = br. 9315
 The Gross Total Earnings of Alemu consists of the br. 8100 basic salary plus the
overtime earnings of br. 1215, which is br. 9315.
3. Demeke
 Gross Total Earnings = br. 10480, which include the basic salary of 9900 and
transportation allowance of br. 580
Thus the taxable income is birr 9900
4. K i ya
 Gross Total Earnings = br. 7600, which is the basic salary.
5. Kibru
 Gross Total Earnings = br. 4550 + 639.84 = br. 5189.84
DEDUCTIONS AND NET PAY
1. Zinash:
 Gross Total Earnings-----------------------------------------br. 12,800
 Gross Taxable Income (br. 12,800 – br. 900)-----------------11,900


Employee Income Tax:
Earnings X Income Tax Rate = Income Tax
0– 600 on 600 0 br. 00.00
601 – 1650 on 1050 10% 105.00
1651 – 3200 on 1550 15% 232.50
3201- 5250 on 2050 20% 410
5251- 7,800. on 2,550 25% 637.50
7,801- 10,900 on 3, 100 30% 930
10,901 -11,900 on 1000 35% 350
TOTAL br. 11,900--------------------------------------------------br 2665
Pension contribution:
Basic salary * 7%
= br. 11,200 x 0.07-------------------------------------------------784
 Total Deduction (br. 2665 + br. 784) -----------------br. 3449
NB. The income tax to be deducted from the employee could have been computed by using the
short-cut method as follows:
= (Taxable Income * Tax rate) – Deduction
= (br. 11900 x 0.35) – br. 1500 = br. 2665
2. Alemu:
 Gross Total Earning-----br. 9315.
 Employee Income tax
= (Taxable Income * 30%) – br. 955 = (br. 9315. x 0.30) – br. 955 = br. 1839.50
 Pension Contribution (br. 9315. x 0.07)------------------652.05
 Credit Association--------------------------------------------1200.00
 Total Deduction------------------------------------------------br. 3691.55
3. Demeke
 Gross Total Earnings------------------------------------br. 10480.00
 Employee Income Tax
= (Taxable Income * 30%) – br. 955
= (br. 9900 * 0.30) – br. 955 = br. 2015
 Pension contribution (br. 9900 x 0.07)---------------------- 693.00
 Total Deductions--------------------------------------------------br. 2708
4. K i ya:
 Gross Total Earnings------------------------------------br. 7600.00
 Gross Taxable Income--------------------------------------7600.00


Employee Income Tax:
= (Taxable Income * 0.25%) – br. 565
= (br. 7600 x 0.25) – br. 565 = br. 1335
5. Kibru
 Gross Total Earnings--------------------------------------br. br. 5189.84
Employee Income Tax:
= (Taxable Income * 20%) – br. 302.50
= (br. br. 5189.84x 0.20) – br. 302.50 = br. 735.47
NET PAY:
Net pay = Gross Total Earnings – Total Deductions
1. Zinash:
Net pay = br. 12,800 – br. (3449)
Net pay = br. 9351

2. Alemu
Net pay = br. 9315 – br. (3691.55)
Net pay = br. 5623.45
3. Demeke:
Net pay = br. 10480.00 – br. (2708)
Net pay = br. 7772
4. kibru:
Net pay = br. 7600.00 – br. (1335.00)
Net pay = br. 6265
5. Kibru:
Net pay = br. 5189.84– br. (735.47 )
Net pay = br. 4454.37
PROVING THE PAYROLL:
Total Earnings:
Basic salary-----------------------------------------------br. 41,350

Allowances-----------------------------------------------------3380
Overtime--------------------------------------------------------2554.84
Grand Total---------------------------------------br. 47284.84
Deductions:
8589.97



Pension Contributions----------------------------------------2894.5
Other Deductions----------------------------------------------1200 =
12684.47

Net Pay Total------------------------------------------------------br. 34,600.37

Total Deductions plus Net pay------------------------------br. 47284.84

The payroll register (or sheet) for Godanaye Rehabilitation Agency prepared for the Month of
Yekatit, 2011 is shown below.
The payroll sheet should have a column for signature of the employee to be taken when the
employee collects the net pay. In general, a payroll register (sheet) should at least show the total
earnings of each employee, deductions, and the net pay together with the names and signatures of
employees.
 


ILLUSTRATION OF A PAYROLL REGISTER

Godanaye is a government agency recently organized to rehabilitate street children. It has five employees whose salaries are paid according to the
Ethiopian calendar month. The following data relates to the month of Yekatit, 2011.
Godanaye
Payroll Register(sheet)
For the month of Yekatit, 2011

Name of Earnings Deductions Signature

Employee of
Employee Gross Income Tolat Employee
Basic Allo- Over time Pension Other Net Pay
ID Earning Tax Deduction
salary wance earning Contribution Deduc.
liablity
700 2665 3449 9351
Gv 001 Zinash Bekele 11200 900 12412.5 784
1215 1839.5 3606.5 7208.5
Gv 002 Alemu Zewde 8100 1500 10815 567 1200
2015 2708 7772
Gv 003 Demeke Shanko 9900 580 10480 693
1335 1867 5733
Gv 004 Kiya Anduale 7600 7600 532
639.84 735.47 1053.97 4535.87
Gv 005 Kibru Jamo 4550 400 5589.84 318.5
2554.84 8589.97 8589.97 12684.47
41350 3380 2554.84 1200 12684.47

Prepared by _______________ Checked by ________________ Approved by___________

                                          
 